The downward trend in Irish interest rates has been underlined by a reduction in fixed-rate mortgage costs by Irish Permanent, the Republic's largest home-loan provider.
The fall in fixed rate mortgage costs reflects a drop in long-term interest rates on the money market and it is now only a matter of time before short-term rates on the market also fall, triggering a reduction in the main variable interest rates charged to most borrowers.
Yesterday a member of the Bundesbank central council, Mr Reimut Jochimsen, warned that this could contribute to overheating in the economy.
Following the lead set by the EBS earlier this week, Irish Permanent has reduced the interest rates on fixed rate loans, which now run from 5.6 per cent for a two-year loan to 6.5 per cent for a 10-year fixed mortgage.
Further underlining the downward trend in interest rates, AIB is making 12-month euro loans available to its corporate clients from next January 4th at a rate of 3.75 per cent, although the bank will not say the amount it is making available at this rate.
Meanwhile, the Dublin money market continues to await a signal from the Central Bank that it will allow short-term interest rates to fall.
At the moment the benchmark one-month rate in Dublin - 6.125 per cent - is more than 2.75 percentage points above the comparable German rate.
When monetary union commences, Irish rates will have to fall to German levels and, with no indication of a rise in German rates and indications from the European Central Bank that rates will remain low, it appears that a sharp fall in Irish money market rates is on the way, some of which will be passed on to retail borrowers.
